Panama Real Estate Market 2010

By Juan Carlos Martinez

After the boom which slowly started its flight in 2003, what is the reality of Panama's luxury real estate market today. Since the beginning of the sky line change Panama has been touted in the international press and retirement magazines as one of the best places to retire, or conduct business. This helped spark Panama's real estate boom and lots of developers launched projects geared towards attracting the foreign market. Real estate prices sky rocketed, speculation became the norm until 2008 with the onset of the global economic crisis which punctured the real estate bubble.

Many apartment complexes and projects that were already pre-sold went ahead and should be delivered to buyers within this year. In Panama upon completion and delivery of the property, the buyer has to pay the balance remaining which in many cases is 70% of the total value of the property or thereabouts. It could be more or less depending on different projects, the nationality of the buyer, among other variables. Now after the economic crisis there is some doubt that the buyers will be able to cover the balances as planned because banks have limited lending and many people lost part of their economic reserves during the market down turn. Additionally many later projects went forward with only half of the units being pre-sold.

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In Punta Pacífica, Costa del Este and Avenida Balboa there are approximately from 8,000 to 10, 000 apartments newly built or being built with price ranges going from 2, 000 to 5,000 per square meter. About half the apartments have not been sold and it generally takes a project promoter 24 to 40 months after delivery to place the property. The luxury market is now saturated and according to ACOBIR (the Association for Panama Realtors) this is not the moment to develop new luxury projects. Some experienced realtors indicate that the problem with the real estate market is that up to 70% of the buyers were property speculators not actual buyers. These people were interested in buying properties in pre-sale prices and then flipping them when they were closer to delivery and the value had appreciated. This is no longer a viable option as promoters themselves are left with units that they need to place circulation, thus a speculator would actually loose money today.

It would be expected that with this amount of inventory the prices would have gone to rock bottom however this has not happened. Prices have frozen and do not seem inclined to go down much further because many of the promoters and owners are betting on the rental market to serve the large number of foreigners settling in Panama with multinational corporations such as Caterpillar and Procter & Gamble as well as the Canal expansion. It is however possible to negotiate and get a good deal on rental contingent on paying for example the whole year in one single payment at the beginning, how long the apartment has been vacant, among other conditions.

The greatest offer of apartments as mentioned is concentrated in Punta Pacifica, Costa del Este and Avenida Balboa consisting of approximately 22 housing complexes of which 16 are owned by three large developers Grupo Bern, F & F Properties and Btesh & Virzi.

If one is an investor in this market It is an uncertain time, however savvy buyers can find real offers with a bit of patience and careful consideration.

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